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Are short-term plans better than none at all for those desperate for health coverage?

Are short-term plans better than none at all for those desperate for health coverage?
California Insurance Commissioner Dave Jones says the state is likely to push back against Trump administration efforts to loosen restrictions on short-term health plans. (Rich Pedroncelli / Associated Press)

When one of Cindy Holtzman's clients told the Woodstock, Ga., health insurance broker he was considering dropping his Affordable Care Act plan because next year's cost approached $23,000 for his family of four, she suggested a new option: a back-to-back set of four, 90-day short-term plans, which would effectively give them a modicum of medical coverage for 2018.

An Obama administration rule limited short-term coverage to three months at a time because it was meant as a stopgap between more substantial policies. But several insurers, including big players Golden Rule and National General Accident and Health, now are sidestepping that rule by packaging three or four consecutive 90-day plans, with a one-time review of a patient's medical history.

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"I'm not pitching this to replace Obamacare, but when you're telling me you're going to get nothing," Holtzman said, "I want to throw this into the arena."

As premiums rise and some middle-class families feel they can't bear the costs of a more secure Obamacare plan with its coverage guarantees, brokers and agencies have unveiled a slew of alternatives.

Consumer interest in other options has grown since the Trump administration stopped paying insurers subsidies they use to lower deductibles for lower-income ACA policyholders, which caused premiums to rise. The administration also has signaled it will soon loosen restrictions for alternative coverage, including ending the rule that limits short-term plans to 90 days.

If the Trump administration ends that 90-day rule, states could push back by imposing stricter regulations on these plans. California would be one of them, said Dave Jones, the state's insurance commissioner.

"I think it's likely that California would shorten the time period of a short-term policy," Jones said. "Generally, policymakers in California who work in the area of healthcare coverage don't believe these [plans] are long-term solutions for people."

The California Department of Insurance estimates that there are only a few thousand active short-term policies across the state. That's because there simply aren't many carriers willing to offer state residents the option, said Sean Malia, a senior director at eHealth.com, a private online health insurance marketplace.

"Carriers can't make those plans work financially in California," he said. "The state is looking for benefits in these short-term plans that are almost on par with ACA plans, and that's not really what the product is intended for."

Advocates warn shoppers considering these plans to carefully read the fine print and understand what they're buying. The plans might not cover what you think.

"While premiums may be a good deal less, overall out-of-pocket costs may be far greater due to policy limits and surprise exclusions," said Betsy Imholz, the director of special projects for Consumers Union in San Francisco.

Most short-term coverage requires answering a string of medical questions, and insurers can reject applicants with preexisting medical problems, which ACA plans cannot do. Preexisting is defined as anything treated — or for which a "prudent person" should have sought treatment — during the previous 12 months to five years, depending on the insurer.

To keep premium costs low, the policies set annual and lifetime caps on benefits. Many don't cover prescription drugs, and most exclude coverage for maternity care, preventive care, mental health services or substance abuse treatment.

"If you absolutely cannot afford [an ACA-compliant plan] — and you are sure you are healthy — look at other plans. But they all come with the caveat that if you get sick, they won't give you much coverage," said Joel Ario, a former Pennsylvania insurance commissioner and now a managing director at Manatt Health Solutions, a consulting firm.

Insurers also can bar coverage for any condition a patient develops during their initial enrollment period, even if they want to sign up again for another term with the same insurer.

"Even if they're healthy enough to get on the plan now, but have a heart attack in a month, they won't be able to reapply and will be out of coverage for the rest of the year" until the next ACA open enrollment, said broker Kelly Rector in O'Fallon, Mo.

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The plans usually pay a percentage of the cost for medical care, after the policyholder pays a deductible, which can range from $1,000 to $10,000 or more per contract term.

Already, insurers have begun offering plans that seem to anticipate that the Trump administration will restore the ability to hold short-term plans for 364 days.

National General's package, for example, guarantees "eligibility for three more consecutive plans." However, in those packages and similar ones offered by other insurers, the deductible resets every 90 days, so the patient would be on the hook for that amount every three months. That means a $5,000 deductible could grow to $20,000 if the policy were kept for the full year.

Premiums vary by insurer and other factors, including age, the deductible and how much coverage the plan provides.

Holtzman says a National General plan for her 46-year-old client, his wife and two children in Georgia with a $2,500 deductible every 90 days would cost $1,348 a month.

That's appealing when compared with his current ACA plan, Holtzman said, for which the premium would be about $1,900 a month next year, with a $3,000 annual deductible.

Still, if the family enrolled in a different ACA plan than his current coverage, the differences narrow.

The least expensive ACA plan in his area would cost his family $1,335 a month, according to government website healthcare.gov, which is about the same as the short-term plan by National. The ACA plan has a bigger annual deductible — $13,600 for his family — but the gap dwindles if someone falls ill and the family ends up meeting the deductible under the short-term plan in each of the four consecutive terms.

Consumer advocates say an ACA plan would cost the family more upfront but would include benefits for any preexisting conditions and would cover more, noting the short-term plan does not include coverage for prescription drugs and excludes benefits for chronic pain, congenital conditions and immunodeficiency disorders.

"People should be aware," said Sabrina Corlette, a research professor at Georgetown University's Health Policy Institute. "There's a huge variety of plans out there from true bottom feeders that are going to take your money and don't provide any protection to legitimate products that are designed to meet a short-term need."

This story was prepared for Kaiser Health News, an editorially independent publication of the Kaiser Family Foundation.

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